UK maintains its position as the primary Islamic finance hub within the West, overcoming obstacles in the process

The United Kingdom has established itself as a leading Western hub for Islamic finance, with a thriving industry that attracts significant foreign direct investment from the Gulf Cooperation Council (GCC) countries.

UK Islamic banks, primarily serving GCC clients, offer a range of products including real estate finance, private banking, wealth management, and digital banking. These banks have seen a 38% year-on-year rise in assets, reaching $11.4 billion by the end of 2024. Notably, the UK is home to over 50 Islamic FinTech firms, including a digital Islamic bank.

The London Stock Exchange (LSE) plays a crucial role in this growth, serving as a key listing venue for global US dollar sukuk. In fact, the LSE is the largest listing venue globally for hard-currency sukuk, with over a 40% share as of end-1H25. Sukuk from UK-based entities amounted to about $740 million outstanding in July 2025, with the majority of sovereign issuances maturing in 2026. However, the UK government does not plan to issue sukuk in 2025-2026.

English law is commonly used to govern most international sukuk, providing issuers with access to a deep, diverse international investor base. The LSE's extensive network of investors contributes to the attractiveness of the UK as a destination for sukuk issuance.

The UK government's support for Islamic finance is evident in its initiatives to address key obstacles to growth. In May 2025, the UK Treasury began consulting on Phase 1 of the Consumer Credit Act Reform to assess barriers and consider measures for sharia-compliant finance. The government also aims to introduce a sharia-compliant student loan scheme, Alternative Student Finance, following the introduction of a more flexible student finance system, the Lifelong Learning Entitlement, from the 2026-2027 academic year.

Despite these efforts, challenges remain, such as limited product options, higher fees than conventional products, and the perception that Islamic finance is only for Muslims. Addressing these issues is crucial for the continued growth of the Islamic finance industry in the UK.

Recent developments in the industry include the acquisition of Bank of Ireland's Islamic home finance portfolio by FinTech company Offa in late 2024. Additionally, Europe Arab Bank launched Islamic banking services in May 2025. The London Metal Exchange, accessed by many Islamic banks for cash financing, further strengthens the UK's position as a hub for Islamic finance.

The UK's history in Islamic finance dates back to 2014, when it became the first western country to issue sovereign sukuk. The follow-up issuance in 2021 underscores the UK's commitment to fostering an environment conducive to the growth of Islamic finance.

As the UK continues to attract investment and support the growth of Islamic finance, it remains a significant player in the global sukuk market. The industry's future looks promising, with ongoing efforts to address challenges and capitalise on opportunities for growth.

UK maintains its position as the primary Islamic finance hub within the West, overcoming obstacles in the process